International Inspection Services (P.) Ltd. {AUTHORITY FOR ADVANCE RULINGS, TELANGANA}

International Inspection Services (P.) Ltd. {AUTHORITY FOR ADVANCE RULINGS, TELANGANA} :

Date of Order : 29-12-2021

simplified explanations of the rulings by the Authority for Advance Rulings (AAR), Telangana, and the High Court of Telangana regarding GST implications:

Ruling by AAR, Telangana – International Inspection Services (P.) Ltd.:

Case Summary: Background: International Inspection Services (P.) Ltd., based in India, provides inspection services where they certify the quality and quantity of goods supplied by Indian suppliers to a foreign client. These services are performed entirely within India.

Issue: The AAR examined whether these inspection services qualify as export of services under GST, which would make them eligible for zero-rated tax treatment.

Key Factors Considered:

1. Place of Supply: According to GST laws (section 13 of the IGST Act), the place of supply determines whether a service qualifies as an export. For services to be considered exports, the place of supply must be outside India.
2. Location of Services: Despite the recipient of the services (foreign client) being located outside India, the actual inspection and certification services are performed within India, where the goods are inspected.

Conclusion: Since the services are physically performed in India (the location of the goods being inspected), the AAR ruled that the place of supply is within India. Therefore, these services do not qualify as export of services under GST.

Implications:

• Tax Liability: International Inspection Services (P.) Ltd. is required to charge and pay SGST and CGST on these inspection services because the place of supply is considered within India.
• Export Criteria: Businesses providing services to foreign clients must carefully determine the place of supply to ascertain if their services qualify as exports under GST. Services performed in India, even if for a foreign client, may not qualify for zero-rated tax treatment.

Ruling by High Court of Telangana – ANI Technologies (P.) Ltd.:

Case Summary: Background: ANI Technologies (P.) Ltd., operating Ola, offers an internet platform where driver partners provide passenger transportation services to customers. The company is GST registered in Telangana.

Issue: The Telangana GST authorities alleged ANI Technologies owed SGST and CGST instead of IGST for passenger transportation services provided by drivers outside Telangana. ANI Technologies argued that IGST should apply under section 12(9) of the IGST Act.

Key Points of Court’s Decision:

1. Tax Liability Dispute: The crux of the dispute was whether IGST or SGST/CGST should apply based on the location of the supplier (driver) and the place of supply (passenger embarkation).
2. Interpretation Issue: The High Court found that the GST authorities had not correctly interpreted section 12(9) of the IGST Act, which governs the determination of the place of supply in such cases.
3. Remand for Reassessment: Consequently, the High Court set aside the GST authorities’ order and directed them to reevaluate ANI Technologies’ liability, emphasizing the correct application of IGST based on the location specifics.

Implications:

• Correct Tax Application: The ruling highlights the importance of accurately determining the place of supply under GST. When the supplier (driver) and the place of supply (passenger embarkation) are in different states, IGST generally applies.
• Review Opportunity: ANI Technologies will undergo a fresh assessment by the GST authorities to determine their tax liability in accordance with the correct interpretation of the law.

These rulings provide clarity on GST implications for services provided within India to foreign clients and for internet platform services facilitating transportation across state borders in India.